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Tax evasion 'costs 1,000 lives a day'

Not paying your fair share of tax makes you partly responsible for the deaths of 5.6million children.

The message to the world’s super-rich individuals and companies has been issued not by a tax authority, but by Christian Aid, one of Britain’s leading charities.

In a detailed report examining the “true toll of tax dodging,” the charity says the practice is so widespread that it is now “tantamount to a new slavery.”

Explaining its claims, Christian Aid calculated that the world’s poorest nations are missing out on at least $160billion (£82bn) a year in tax revenues.

This sum towers above the $40 to $60bn estimated by the World Bank that is needed to pay for the United Nations Millennium Development Goals.

Under the MDG, the organisation has committed to an aim of halving poverty by 2015, a move that would save 350,000 children’s lives a year.

“We predict that illegal trade-related tax evasion alone will be responsible for the deaths of 5.6million children under the age of five between 2000 and 2015,” said Christian Aid’s director Dr Daleep Mukarji.

Breaking down the figures, the group’s implication is that super-rich individuals and outfits are killing almost 1,000 children a day by failing to pay their fair share, or any, tax.

Wealthy corporations or individuals who act within the law by using schemes to minimise their tax liabilities – known as tax avoidance – aren’t much better, according to the charity.

The not-for-profit group notes that avoidance is part of a “sliding scale of legitimacy,” in particular tax havens, which, they argue, encourage secrecy and in turn foster criminality.

In its report it cites four reasons, each of which it condemns, for banking in offshore havens: to avoid tax, to evade tax, to operate in secret, or to sidestep financial regulations.

“In each scenario, the pursuit of profit outweighs all other considerations,” states the report, “-including good citizenship and social responsibility.”

Setting up a holding company in a tax haven to reduce tax bills is also denounced by the report, regardless of whether the motive is to hold profits, licences or intellectual property.

The shot across the bows of corporations is meant to hurt giants like BP and Wal-Mart, but the report authors also singled out other key players for criticism.

U2 lead singer Bono, pop start Phil Collins and Formula One racing champion Lewis Hamilton are each frowned upon, despite all acting legally to minimise their tax bills.

The report points to the British government as the key to changing the uneven tax landscape – because so many havens are dependent or linked to the Crown; such as the Isle of Man and Bermuda.

But its authors don’t shy away from an acute irony: the CDC plc, owned by the Department for International Development, uses tax havens to avoid paying tax on its £350m in profits.

The charity’s toughest talk, however, is reserved for the accounting, tax and financial experts who have made tax reduction schemes possible for individuals and corporations alike.

It said the “grey area” of tax avoidance has become “increasingly aggressive”, as more “complex instruments are peddled by the tax industry with the sole purpose of getting around laws and regulations.”

The report’s authors reflected: “Some idea of the size of this activity can be grasped by considering an astonishing fact; a full 50% of world trade is reported to take place through tax havens.”

In terms of tax evasion, the charity estimated that the deaths of around 350,000 children under five are potentially avoidable each year by wiping out abusive transfer pricing and false invoicing; just two of the five main ways tax is avoided.

May 13, 2008
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